Modeling Reimbursement in the Changing Payment Environment David Hammer – Principal Healthcare Performance Management Consultants, LLC HFMA – Kentucky

Modeling Reimbursement in the Changing Payment Environment

David Hammer – PrincipalHealthcare Performance Management Consultants, LLC

HFMA – Kentucky

Annual Summer Education Institute

Thursday 24 July 20141:15 PM – 2:30 PM

HFMA’S SPRING SEMINARS 2014

Introduction: Today’s World …and Tomorrow’s

Transitioning to Fee for Value

Medicare Break-Even – Response to Health Reform

Bundles (Episodes) – The New Unit of Analytics

Five Keys to Organizational Success

The Way Forward – Where Do We Go From Here?

Content and Organization

2


3

Where’s your focus?


4

Today’s World…and Tomorrow’s


Today’s WorldYou know the trends…

5


Today’s WorldYou know the trends…

6


Today’s WorldIf We Can Do THIS…

7 7


…Then Why Can’t We Come Up with Something Better Than THIS?!?

8 8


Today’s WorldIt’s not our fault, but it IS our problem!

9 9


100%

80%

60%

40%

20%

Global Payment + Episodic Bundling

Traditional FFS

FFS Shared Savings

Global Payment + Episodic Bundling

FFS Shared Savings

Traditional FFS

“Next Generation” P4P: ~60% of all payment systems

P4P: Varying levels of use with Traditional Fee-For-Service

Payment Mix Today Incremental Payment-Mix Shift Under Payment / Delivery Reform

“Next Generation” P4P: ~80% of all payment systems

FFS Shared Savings

Traditional FFS

Traditional Capitation

Bundling (Episodic)

POV: Market Summary

≤2010 2011 2012 2013 2014 2015

Government Programs Timeline

Individual feedback physician reports

Evaluation until 2016, w/extension

2014-Payments reduced for failure to submit quality measures

Voluntarily meet quality thresholds for ACOs

Physician Quality Reporting Initiative

Hospital value-based purchasing program

Bundled Payment Pilot

Shared Savings Program

Today’s WorldACA Readiness – Not IF, WHEN!

10


Comments from Stamford at Health Insights“How can we scale for a 28% Medicare cut? Even if we merge it is not scalable”

“We do not think the majority of revenue will be value based – only certain products”

“I am a skeptic of population health management – when an insurance company wants to off load risk, then we do not want that risk”

“The government is not a good long-term business partner”

“The Pioneer ACOs are not working – the juice is not worth the squeeze”

“No incentive for patients to stop smoking, exercise, etc…”

“Stick to basics, manage costs, and grow volume”

“We will do an ACO for our employees – If we cannot do it there, we cannot do it anywhere (Frank Sinatra)”

“I sat with a bunch of Boston hospitals and they are still fee-for-service”

“Culture is the biggest challenge. Our physician group is not organic, but an amalgamation; the problem is that we are trying to change the tires on a moving car”

Today’s WorldWhere to Focus, and WHEN?

11


Today’s WorldRelationships Being Shuffled as a Result of “Risk”

12

Patient

PayerProvider


13

Transitioning to Fee for ValueIndustry Response to Evolving Payment Systems


Transitioning to Fee for ValueWe Have to Have Our Feet in Two Boats

14


Transitioning to Fee for ValueNeed a Unified Reimbursement Solution

ContractualAdjustments

“What If” Modeling

Payment Discrepancies

Patient Estimates

Episode / BundleManagement

Consolidated Collections

Development of Custom Bundles

Payment Distribution

HOSPITAL PAYERPROFESSIONAL ACO

Unified Reimbursement

Analytics

15


Affordable Care Act created disruptive change

Most-significant change since Medicare and the proliferation of employer-provided health insurance

Similarly to those developments, ACA will dramatically change how providers will be paid

Fee for Service (FFS) payment system evolving to value-based (FFV) reimbursement, dependent on patient-care quality and cost

Specific ACA directives present a complex matrix of penalties, incentives, and reimbursement withholds

Transitioning to Fee for ValueAffordable Care Act – Heralding Value-Based Payment

16


Organizations that don't fully understand these issues will find themselves at a significant competitive disadvantage

Widespread development of core organizational competencies around value-based reimbursement has been virtually impossible

This is due to a variety of well-documented factors: – No single repository for applicable regulations; few published books or reference

guides

–  Final regulations can only be found by reviewing thousands of pages of complex CMS rules and policy statements in the Federal Register

– New regulations often change portions of prior regulations without explanation; and the Administration continues to delay some of the Act’s provisions

– Workloads continue to increase with little time to research the new regulations

– Information is fragmented, located in multiple government sources, changes often, and is often contradictory

– There are over 1,100 quality metrics that may determine reimbursement levels

Transitioning to Fee for ValueAffordable Care Act – Heralding Value-Based Payment

17


Healthcare Business News 2013 McKesson Survey of 139 CFOs

40% “not at all” prepared to tackle population health via ACOs

53% “only somewhat” prepared to tackle population health via ACOs

14% “very prepared” to manage care under a value based care system

23% “not prepared at all” to manage care coordination

Changing expectations:

– Current: 77% of MD contracts contain productivity- or volume-based incentives

– Future:• MD contracts based on efficiency will

grow from 16% to 67%• MD contracts based on quality will grow

from 65% to 85%

Texas Medical Association 2011 Survey of 29,540 MDs / 3,580 Replies

Physicians are uncertain about how the Affordable Care Act will affect their practices and patients

74% are anxious; 62% confused

“They're confronted by declining revenue that threatens to drive many of them from their practices and jeopardize their patients' access to care, increased scrutiny from insurers who want to rate them on their ‘cost efficiency,’ and a confusing federal overhaul of the health care system that may fundamentally change the way they practice medicine.”

Transitioning to Fee for ValuePhysicians and Hospitals are “Stressing Out”

18


19

Master the Affordable Care Act’s value-based-reimbursement regulations

Understand the current and future impact these regulations will have on Medicare reimbursement

Assess potential for “copycat” initiatives from commercial payers

Develop care-improvement strategies to raise quality and cut costs

What is needed

• Expert resources providing a “road-map” for navigating the new world

• Resources for the development of organizational competencies around value-based reimbursement

Transitioning to Fee for ValueHospitals, Physicians, SNFs, Rehabs, etc. MUST


Transitioning to Fee for Value Bridging the Value Chasm to Bundled Payment

Paradigm Shift• From reactive to proactive management• From disease management to patient

management• From patient management to population

management• From siloed care to coordinated care• From fee-for-service to fee-for-value

20


Accountable Care Organizations (ACOs)

Bundled-payment arrangements

Quality-performance incentives

Narrow-network arrangements

Gain-sharing with physicians

Shared-risk contracts

Full-risk contracts

Capitation

SOURCE: Harris, John and Rashi Hemnani, “The Transition to Emerging Revenue Models,” hfm, Apt 2013

Transitioning to Fee for ValueEmerging Alternative Payment Models

Great Variety Among Potential Payment Methodologies / Contracts

21


Future Medicare Payments Will Likely Sort into Groupings

Elective / Procedural Total Joint Replacement Bundled MC Part A and B

Chronic / Medical CHF, Pulmonary, etc. Episodic Payment to manage

Emergency Major Bowel, etc. Fee for Service

Transitioning to Fee for ValueMedicare Alternative Payment Models

22


An assessment aimed at gauging the true impact of value-based payment models should include separate analyses of Direct contract results Impact of volume changes on net income Impact of operational and clinical improvements Net income at risk from competitor actions Other strategic benefits

Sample financial analysis could be based on estimated results for four different hypothetical contracts Medicare ACO with 10,000 lives Commercial ACO with 20,000 lives Medicare bundled payments with 275 expected cases Commercial narrow network with 10,000 lives

Transitioning to Fee for ValueFinancial-Assessment Models

SOURCE: Harris, John and Rashi Hemnani, “The Transition to Emerging Revenue Models,” hfm, Apt 2013 23


Transitioning to Fee for ValueFinancial-Assessment Models


The four contracts would reduce net income by $740K on ~$200M of payer spend $200M of payer spend does not represent $200M of health system revenue, as payers

are spending some of these funds on other types of providers In many cases, the direct result of the contract may be neutral or negative That does not mean the overall impact of the contract will be negative, particularly

when competitor actions are considered 24


Transitioning to Fee for ValueBundled Payment – Best Chance to Bend the Cost Curve

Estimated Cumulative Percentage Changes in National Healthcare Expenditures: 2010 through 2019

Source: Hussey P., et al. New England Journal of Medicine 2009;361:2109-2111

Care-coordination

methods tie in well with bundled-payment

Initiatives, provide

additional impact

Bundled payment has the largest projected

impact

25


Transitioning to Fee for Value Bundled Payment ROI – Prior Medicare Programs

Cardiac Bypass Center Project

In the first 27 months of the project, bundled payments saved more than $17 Million at four hospitals

Source: Robert Wood Johnson Foundation. Prepared by Bailit Health Purchasing, LLC. ‘Payment Matters: The ROI for Bundled Payment.’ Feburary 2013.

Acute Care Episode (ACE) ProgramAs of May 2011, bundled payments in San Antonio’s Baptist Health System saved more than $2,000 per case, for a total of $4.3M saved since 2009

Additionally, physicians are receiving approximately $280 in bonus payments per episode

26


Geisinger ProvenCare®

Coronary Artery Bypass Grafting (CABG) Hospital net revenue grew 7.8% Contribution margin of index hospitalizations grew by 16.9% 30-day readmission rate decreased by 44% Average LOS fell by 8.1% / 0.5 days (from 6.2 to 5.7 days) Overall Geisinger Health System volume increased Patient outcomes improved Employers have healthier employees and lower premiums

Source: Geisinger ProvenCare® - Premier® Conference Presentation and Executive Summary. Published December 2008.

Transitioning to Fee for Value Bundled Payment ROI – Geisinger ProvenCare®

27


Transitioning to Fee for ValueMarket Share and Operational Improvement Models



Transitioning to Fee for ValueRevenue Risk and Summary Assessment Models



Transitioning to Fee for ValueSummary Financial-Impact Assessment

The result of these new models is a loss of $300,000. If a loss is expected, why do it? The response should consider another question: “Compared with what other strategy?” When status quos used for comparison, pursuing the new models doesn’t look preferable But the future is likely to upset the status quo, and it is important to factor into the analysis

the very real likelihood of competitor activity This threatens market-share and utilization losses – yet offers the potential for a $2 million

positive impact from countering this activity30


24

NDMTMN

SD

NE

IA

KS

UT

NV

WA

MO

OR

NM

GAAL

SC

VA

KY

AR

LA

AZOK

WY

ID

CO

IL

NC

MS

PA

TN

MI

WI NY

OH

MA

TX

IN

FL

NJ

NH

VT

ME

RI

MD DEWV

CT

CA

18

6

16 2

375

5

1

23

5

6

2

3

3

1

1

2

1

3

3

9

2

4

2

24 210

27

10

3

3

28

4

7

10

6455

25

1

11

1811

3

Numbers indicate total healthcare facilities participating in each state

46 of 50 states participating278 Providers, 175 IDNs, 463 Facilities, 48 Episodes, 178 DRGs70% of inpatient Medicare spend impacted, due to inclusion criteria

States with >10 Provider Facilities

Not Participating

States with <10 Provider Facilities

Transitioning to Fee for ValueCMMI BPCI Initiative Includes Almost 500 Facilities

On January 31, 2013, the Centers for Medicare & Medicaid Services (CMS) announced the health care organizations selected to participate in the Bundled Payments for Care Improvement initiative, an innovative new payment model. Under the Bundled Payments for Care Improvement initiative, organizations will enter into payment arrangements that include financial and performance accountability for episodes of care. These models may lead to higher quality, more coordinated care at a lower cost to Medicare.

31


32

Transitioning to Fee for Value Rapid Market Expansion – Growth Trends

Bundled Payment Initiatives(Number of Providers Participating in CMMI-BPCI, Commercial Payor and Employer Contracts)

Source: MedAssets Bundled Payment Market Database

2009 2010 2011 2012 20130

50

100

150

200

250

300

350

1029

50

143

330

6 10 12 2131

No. of Providers

Providers with Com-mercial Contracts

Payers - Bundled Payment Market1 Aetna2 Anthem3 Anthem BCBS of Missouri4 Anthem BCBS of Wisconsin5 BCBS of Arkansas6 BCBS of Illinois7 BCBS of Massachusetts8 BCBS of Minnesota9 BCBS of North Carolina

10 BCBS of Rhode Island11 BCBS of South Carolina12 BCBS of Tennessee13 BCBS of Western New York14 Blue Cross of Idaho15 Blue Shield of California16 CIGNA17 Colorado Choice Health Plans18 Community Health Choice19 ConnectiCare20 CoxHealth Plans21 Florida Blue22 Geisinger Health Plan23 Health First24 Health New England25 HealthNow26 Horizon BCBS of New Jersey 27 Humana28 Independence Blue Cross29 Medicare30 Oxford Health Plan31 Priority Health32 Providence Health Plan33 QualChoice34 United Healthcare

32


Transitioning to Fee for ValueRapid Market Expansion – Providers and Payers

1 Source: Health Enterprise Partners, “ Seizing Opportunity in the Wake of Reform-Executive Perspective Survey, 2012.2 Source: Availity, The Health Plan Readiness to Operationalize New Payment Models, April 2013. The study was administered by independent research firm Porter Research in the fourth quarter of 2012. Porter Research completed interviews with qualified participants of 39 health plans that represented more than 50 percent of total covered lives in the United States. Target participants included Quality Management leadership, Medical Directors, and Chief Medical Officers.

0%

5%

10%

15%

20%

25%

30%

35%

40%

38%35%

27%

Average Percentage of Hospital Revenues by 2018 1

24%

34%

No plans 42%

Early Mid Late Unsure

43%

36%

7%

14%

Currently implemented

Planning toimplement

Bundled Payment Implementation Progress 2

What phase of bundled payment plan implementation is your health plan currently in?

Bundled PaymentImplementation Plans 2

Health PlansHealth Systems

In the next five years, bundled payments will be 35% of health systems’ revenue.24% of health plans are currently implementing bundled payment contracts

33


Large employers, health payors, and integrated health systems have signed over 30 bundled-payment contracts

24

NDMT MN

SD

NE

IA

KS

UT

NV

WA

MO

OR

NM

GAAL

SC

VA

KY

AR

LA

AZOK

WY

ID

CO

IL

NC

MS

PA

TN

MI

WI NY

OH

MA

TX

IN

FL

NJ

NH

VT

ME

RI

MD

DEWV

CT

CA

1

4

1

5

1

1

1

2

2

1

2

44

1

2

1

States with Commercial Bundled Payment Contracts

1

Numbers indicate total healthcare providers signed commercialbundled payment contracts in each State

1

• 21st Century Oncology: Humana• Florida Orthopedic Institute: Florida Blue• Mayo Clinic: Florida Blue; Walmart• Mobile Surgery International: BCBS of Florida

Providence Hospitals: BCBS of SC

• Carolinas Health Care: Local Employers• Caromont Health: BCBS of NC• Duke University Hospital: BCBS of NC• NC Specialty Hospital: BCBS of NC

Johns Hopkins: Pepsi Co

Geisinger: Walmart; and ProvenCare Initiative with GHP

St. Francis Hospital: ConnectiCare

Kalieda Health: BCBS of Western NY

Cleveland Clinic: Walmart; and Lowes

Orthopedics Institute at Fox Valley: Anthem BCBS

• Tria Orthopedic Center: BCBS of MN• Mayo Clinic: Walmart

Black Hills Surgical Center: SD State Employee Health PlanVirginia Mason Medical

Center: Walmart

Intermountain Healthcare: BCBS of Idaho

Hoag Orthopedic: - BCBS of CA - Aetna - Cigna - Kroger Co.

Mayo Clinic: Walmart

Scott and White Memorial: Walmart

• SSM Healthcare: BCBS of MO• Mercy Hospital: Walmart

• Vanderbilt Medical Group: BCBS of TN• TN Orthopedic Alliance: BCBS of TN• Campbell Clinic: BCBS of TN• Knoxville Orthopedic Clinic

Transitioning to Fee for ValueRapid Market Expansion – Commercial Contracts

34


Transitioning to Fee for Value Rapid Market Expansion – ACOs Bundling Payments

47

10

10

11

1111

15

18

18

20

22

28

35

99

9

9

7

9

6

7

4 8

8

9

1

2

3

3

4

1

5

6

3

2

1

7

3

2 1

1

2

23

3

Adventist HealthAscension HealthCalifornia Pacific Medical CenterCedars Sinai Health SystemDignity HealthHoag MemorialJohn Muir Health SystemMercy Healthcare SacramentoProvidence Health and ServicesSaint Joseph Health SystemScrippsSharp HealthCareSutter HealthTorrance Memorial HealthTri-City Healthcare DistrictUC HealthUCLA Health System

California IDN -ACO:17

Baystate HealthBerkshire HealthBeth Israel HealthCareCambridge Health AllianceCape Cod Healthcare Jordan HealthLahey HealthLowell GeneralPartners HealthCare Sisters of ProvidenceSouthcoast HealthSteward Health Care Tufts Medical Center Vanguard Health Systems

MassachusettsIDN-ACO:14

Baptist Health South FloridaBayCare Health SystemHoly Cross Health MinistriesNCH Healthcare SystemOrlando HealthParrish Medical Center

Ascension HealthBaptist Health SystemBaylor Health CareMemorial HermannMethodist Health SystemSaint Luke's Episcopal Health SystemTexas Health ResourcesUMC Health SystemUSMD Holdings Inc.

Cape Fear Valley Health SystemCarolinas HealthCare SystemCaroMont HealthCone HealthMission Health SystemRandolph Hospital Southeastern Regional MedicalUNC Health Care SystemWilMed Healthcare

North CarolinaIDN-ACO:9

FloridaIDN-ACO:6

TexasIDN-ACO:14

442 ACOs – 53% owned by IDNsEight states represent 50% of ACOs

30% of IDN-owned ACOs are participating in CMMI-BPCI

(Numbers indicate total ACOs in each State. IDN-ACO lists IDNs that own ACOs in major states. IDN-ACOs participating in CMMI-BPCI is highlighted in red)

All counts are as of March 29th, 2013.

35


Transitioning to Fee for Value Rapid Market Expansion – “Super ACOs” Forming

SOURCE: Anderson, David and Neal Hogan, “Emerging Super ACOs Fill Unique Needs,” hfm, Oct 2013

Forming or joining a Super ACO may offer systems several advantages over building their own ACOs or merging with other systems

Economies of scale can reduce each partner’s investment in accountable-venture health plans and other “go to market” vehicles

Super ACOs can expand the partners’ geographic coverage, to access a larger population base

Super ACOs can focus management attention and resources on closing gaps in care delivery that contribute directly to performance shortfalls

Retaining separate health system ownership avoids the complexity and costs associated with changes in health system ownership and governance

36


Transitioning to Fee for Value Rapid Market Expansion – “Super ACOs” Forming

SOURCE: Anderson, David and Neal Hogan, “Emerging Super ACOs Fill Unique Needs,” hfm, Oct 2013

Potential initiatives are numerous, but some have more advantages than disadvantages New Super ACOs may benefit most from the use of tangible initiatives with short-term

benefits Concrete, easy-to-understand initiatives that produce “quick wins” are the best way to

generate excitement and build management support Market-facing initiatives are good they allow the ACOs to demonstrate unequivocal

success. If successful, such initiatives may pay off well in one to two years Established Super ACOs can undertake more complex initiatives, such as joint

infrastructure development projects. 37


Medicare Break-EvenIndustry Response to Health Reform

38


The Berwick Principle

39

“The First Law of Improvement”

Every system is perfectly designed to achieve exactly the

results it gets.

Don Berwick, MDFormer CMS Director

April 27, 2012

Coherent program to achieve

• Best cost per case

• Optimal revenue

• Long term sustainability

For ALL payors

Medicare Break-EvenThe Berwick Principle


Most Providers in the Industry are “2” or “3” on a Scale of

10

A few, like IHC, Kaiser, & Geisinger might currently be

a “6 or 7”

Medicare Break-EvenEach provider is currently at a different level All must advance, not all are ready

40


Outliers

Past FocusRemove Outliers

Future FocusShift Curve &

Reduce Variance

Medicare Break-EvenFuture Success Will Depend on Alignment: Clinical Integration, Costs, Payments, and Technology

41


* Includes Medicare Advantage patients

HospitalMedicare Volume

Medicare Inpatient Revenue

Medicare Total Cost

Medicare Margin

% Margin

Provena St Joseph Medical Center - Joliet, IL 13,019 $117,168,317 $130,928,210 -$13,759,893 -12%Resurrection Medical Center - Chicago, IL 9,649 $112,595,281 $124,771,572 -$12,176,292 -11%St Mary of Nazareth Hospital Center - Chicago, IL 7,799 $105,497,677 $122,401,702 -$16,904,025 -16%St Joseph Hospital - Chicago, IL 5,495 $68,306,870 $77,370,591 -$9,063,721 -13%Our Lady of the Resurrection Medical Center - Chicago, IL 4,804 $48,145,991 $53,302,017 -$5,156,026 -11%Provena United Samaritans Medical Center - Danville, IL 4,772 $34,240,463 $38,589,626 -$4,349,162 -13%Provena Covenant Medical Center - Urbana, IL 4,526 $44,207,443 $49,743,688 -$5,536,244 -13%St Francis Hospital - Evanston, IL 4,520 $63,464,140 $70,856,386 -$7,392,246 -12%Provena Mercy Medical Center - Aurora, IL 4,486 $40,950,211 $46,486,811 -$5,536,600 -14%Provena St Mary's Hospital - Kankakee, IL 3,644 $31,602,006 $35,934,776 -$4,332,769 -14%Holy Family Medical Center - Des Plaines, IL 634 $32,088,309 $35,833,059 -$3,744,750 -12%Totals 63,348 $698,266,709 $786,218,436 -$87,951,727 -13%

System’s Medicare and Medicaid Payer Mix is 63%

Medicare Break-EvenMedicare Margin Analysis – by FacilityAnalysis used actual volumes and payments, and vendor’s proprietary estimated cost per case

42


ServiceLine

PatientVolume

Inpatient Revenue

TotalCost

Service-Line Margin

MarginPercent

Cardiology 10,573 $99,228,642 $109,654,007 -$10,425,365 -11%

Cardiac Surgery 560 $20,994,891 $22,197,877 -$1,202,986 -6%

Vascular Surgery 1,445 $27,424,755 $30,608,828 -$3,184,073 -12%

Medical 27,175 $225,451,789 $254,916,708 -$29,464,920 -13%

Behavioral Health 5,171 $34,883,249 $46,616,597 -$11,733,348 -34%

Surgical 4,156 $87,712,004 $95,401,686 -$7,689,682 -9%

Women & Children 415 $3,507,404 $4,216,548 -$709,144 -20%

Oncology 811 $9,303,203 $10,475,353 -$1,172,150 -13%

Orthopedics 7,127 $94,310,050 $108,433,294 -$14,123,245 -15%

Neurosciences 4,405 $42,436,325 $46,959,063 -$4,522,737 -11%

Other 1,510 $53,014,396 $56,738,474 -$3,724,077 -7%

TOTAL 63,348 $698,266,709 $786,218,436 -$87,951,727 -13%

Medicare Break-EvenMedicare Margin Analysis – by Service Line

43


MSDRG Description VolumeInpatient Revenue Total Cost Margin

885 Psychoses 3,835 $27,529,374 $36,308,856 -$8,779,481

945, 946 Rehabi l i tation 2,460 $38,918,252 $43,381,297 -$4,463,045

871, 872 Septicemia w/o MV 96+ Hours 3,107 $39,485,698 $43,460,560 -$3,974,862

469, 470 Major Joint Replacement or Reattachment of Lower Extremity1,390 $20,176,131 $23,520,309 -$3,344,178

291, 292, 293 Heart Fa i lure & Shock 3,045 $24,325,052 $27,206,049 -$2,880,997

190, 191, 192 Chronic Obstructive Pulmonary Disease 2,626 $17,682,821 $20,192,223 -$2,509,402

207 Respiratory System Diagnos is w Ventilator Support 96+ Hours378 $21,947,021 $24,173,391 -$2,226,369

896, 897 Alcohol/Drug Abuse or Dependence w/o Rehabi l i tation Therapy901 $4,698,768 $6,851,992 -$2,153,224

193, 194, 195 Simple Pneumonia & Pleurisy 1,801 $13,358,163 $15,333,135 -$1,974,972

377, 378, 379 G.I . Hemorrhage 1,405 $11,362,649 $13,187,926 -$1,825,278

480, 481, 482 Hip & Femur Procedures Except Major Joint 649 $9,000,552 $10,644,393 -$1,643,840

682, 683, 684 Renal Fa i lure 1,810 $16,344,229 $17,915,816 -$1,571,586

391, 392 Esophagitis , Gastroent & Misc Digest Disorders 1,543 $8,232,626 $9,777,927 -$1,545,301

602, 603 Cel lul itis 1,231 $7,802,215 $9,325,779 -$1,523,564

689, 690 Kidney & Urinary Tract Infections 1,913 $11,658,868 $13,061,482 -$1,402,614

252, 253, 254 Other Vascular Procedures 568 $10,704,869 $12,095,351 -$1,390,481

177, 178, 179 Respiratory Infections & Infl ammations 795 $9,912,811 $11,118,621 -$1,205,810

64 , 65 , 66 Intracrania l Hemorrhage or Cerebra l Infarction 1,231 $10,998,333 $12,158,266 -$1,159,933

329, 330, 331 Major Smal l & Large Bowel Procedures 589 $14,599,652 $15,691,230 -$1,091,577

308, 309, 310 Cardiac Arrhythmia & Conduction Disorders 1,646 $9,284,682 $10,249,834 -$965,152

208 Respiratory System Diagnos is w Ventilator Support <96 Hours368 $6,744,567 $7,701,036 -$956,469

640, 641 Nutritional & Misc Metabol ic Disorders 1,153 $6,372,284 $7,293,228 -$920,944

811, 812 Red Blood Cel l Disorders 787 $4,837,423 $5,685,447 -$848,024

237, 238 Major Cardiovascular Procedures 269 $7,735,067 $8,562,160 -$827,093

246, 247 Perc Cardiovascular Px w Drug-Eluting Stent 692 $11,901,483 $12,718,792 -$817,309

Medicare Break-EvenMedicare Margin Analysis – Top 25 Target DRGs

44


45

Top Chronic-Disease Populations

Top Bundled Populations

Ten Patient Types $190M+ Cost $ 21M+ Losses

Septicemia 3,107 39,485,698$ 43,460,560$ (3,974,862)$ COPD 2,626 17,682,821 20,192,233 (2,509,412) Simple Pneumonia 1,801 13,358,163 15,333,135 (1,974,972) CHF 3,045 24,325,052 27,206,049 (2,880,997) Stroke 1,231 10,998,333 12,158,266 (1,159,933)

11,810 105,850,067$ 118,350,243$ (12,500,176)$

Chronic MC Volume

MC Reimbursement MC Cost MC Margin

Total Joints 1,390 20,176,131$ 23,520,309$ (3,344,178)$

Other Vascular 568 10,704,869 12,095,351 (1,390,482)$

DES 692 11,901,483 12,718,792 (817,309)$

Hip and Femur 649 9,000,552 10,644,393 (1,643,841)$

Major CV` 269 7,735,067 8,562,160 (827,093)$

3,568 59,518,102$ 67,541,005$ (8,022,903)$

Bundled Patient Type MC Volume

MC Reimbursement MC Cost MC Margin

Medicare Break-EvenMedicare Margin Analysis – by Two Top-5 Groups


-$345M Swing in Operating Margin

TodayHealth System P&L

Net Operating Revenue $2.660BTotal Operating Expenses $2.645BOperating Margin $0.015B

Medicare as Payment Proxy(Revenues at 87% of today’s costs)

Net Operating Revenues $2.315BTotal Operating Expenses $2.645BOperating Margin ($.330B)

87%

Medicare Break-EvenWhat if Medicare Became an All-Payer Proxy?

46


$70M $140M

Rationalized Cost andResource Consumption

Aligned Care

Evidence Based Compliance

(2014) (2015)

StandardizedLocations and Functions

Patient Care Guidelinesand Compliance

Alignment of Incentives for

Reform

Transition to Value-Based Purchasing

Leve

l of D

ifficu

lty

Standardized Materials and Logistics

“Best Practices and Common Sense Applied”

ReinventionThrough Technology

Clinical Alignment

$210M

(2016)

$280M

(2017)

$350M

(2018)Phase I

Medicare Break-EvenWhat is Required to Close the Gap?

47


1. Attack costs at the patient level – Identify and group patient populations to:

a. Realize savings in supplies, purchased services, and labor

b. Reduce clinically unnecessary utilization thru evidence-based protocols

2. Address traditional fixed costs and redundant service areas

3. Achieve greater revenue predictability and integrity

4. Implement sustainable programs for cost and quality impact

Medicare Break-EvenPhase I Implementation Approach

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Bundles (Episodes)The New Unit of Analysis in Healthcare


Bundle DefinitionsBackground

Insights on the following slides are drawn from experience working with health systems and health plans Prometheus PAC1 analysis

Prometheus episode production in MedAssets Episode Manager system

CMMI “Bundled Payment for Care Improvement Initiative” analytics

– 35 MedAssets acute episodes (developed to apply for CMMI initiative)

– 48 CMMI BPCI episodes (run by MedAssets)

Physician compensation pilot, using MedAssets Chronic Care Episodes

MedAssets Episode Builder definitions, including behavioral health, women’s health, and chronic systems

1. Potentially avoidable complications (PACs) for patients with one or more chronic illness include events such as emergency department visits and hospitalizations. For patients hospitalized with an acute medical illness such as AMI, pneumonia, or stroke, these events may occur during the index stay or during the 30‐day post‐discharge period. PACs include measures that have already been tested and are widely used such as ambulatory‐care sensitive admissions, hospital‐acquired conditions, and inpatient‐based patient safety failures.

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The Right Bundle DefinitionThe Right Price

The Right Execution Plan The Right Monitoring System

KEY Success Imperatives

Bundle Definitions Key Success Imperatives

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Asthma COPD (Pulmonary disease) CHF Diabetes Acute Myocardial Infarction Pneumonia Stroke Hysterectomy

MedAssets Acute Care Episodes

Hip replacement Knee replacement CABG Colon resection Gall bladder Knee arthroscopy PCI (angioplasty) Renal Failure Spinal Fusion

Breast Cancer Colon Cancer Low back pain Sinusitis

American Board of Medical Specialties

HVHC Diagnostic

Catheritization Angioplasty (PCI) Knee Menisectomy Hip Replacement Knee Replacement Knee Arthroplasty

Integrated Healthcare

Association

Asthma COPD(Pulmonary

disease) CHF Coronary Artery Disease Diabetes Hypertension Gastro-Esophageal

Reflux Disease Acute Myocardial

Infarction Pneumonia Stroke Hysterectomy Hip replacement Knee replacement Bariatric Surgery CABG Colon resection Colonoscopy Gall bladder Knee arthroscopy PCI (angioplasty) Pregnancy and delivery

HCI3 Prometheus/

PACES

ADHD Long Term Care

Services Tonsillectomy Developmental

Disabilities Colonoscopy Cholecystectomy Ambulatory URI

CABG Thoracic PCI

Bariatric Perinatal

Geisinger ProvenCare1

Women’s Health Behavioral Health

Hartford Healthcare

Preventative care adults

Preventative care children

Minnesota Baskets of

Care

Bundle DefinitionsWho Has Bundling Expertise?

Arkansas Healthcare Payment-

Improvement Initiative

1 Not currently available for non-Geisinger participants

48 MS-DRG Episodes

Bundled Payment for

Care Improvement

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Bundle Definitions EVERY Encounter Must Be Properly Captured/Processed

## Days Look-Back

## Days Post-Discharge

Index Hospitalization

Professional Claims

Keys: Irrelevant Claims Typical Claims

Claims with Potentially-Preventable Complications

ReadmissionAcute Inpatient Claims

Other Claims (Outpatient, SNF, HHA, Rehab, etc)

ER visit

*Episode trigger and relevant services are defined based on diagnosis codes, procedure codes, DRG codes, or the combinations of above.

**Typical services and complications are defined based on the clinical guidelines.

Inpatient Professional Inpatient Professional

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Bundle Definitions Must Be Refined and Customized

Bundle Definition

Trigger Event

Prior PeriodStart / EndTypical Services

IncludedExclusionCriteria

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Care Improvement Opportunities

Preventable Complications

ReadmissionPost-Acute Care

Typical Care ComparisonFacility

ComparisonPhysician

Comparison

Bundle Definitions Must Be Aligned with Care-Improvement Opportunities

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Operational Parameters

Clinical Guidelines

Provider Attribution

Quality Measures

Core Services

Bundle Definitions Must Take Your Implementation Strategy Into Account

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Payment Methodology

Risk Adjustment

Stop-loss Provisions

Gain/Risk Sharing

Other Adjustments

Bundle Definitions Must Incorporate Implementation Financial Components

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$4,428$4,132

$3,874$4,078

$5,628

$3,815

$1,436

$3,492

$6,934

$4,471

$1,690$1,220

$1,150

$3,665$4,066

$5,186

$3,580

$1,463

$1,890

20% 37% 7% 9% 15% 26% 2% 5% 65% 27% 7% 6% 5% 18% 26% 11% 6% 6% 7%

Spine

Knee

Exposure per case

Bundle Definitions Definitions/Pricing Drive Financial-Risk Exposure

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Benchmark Group

Patient over

Expected Payment,

%

Average Episode Payment

Average Length of Stay

Readmission Rate

ER Visit Rate

Compli-cation Rate (All)

Mortality RateTotal

Acute Care

Post- Acute

TOP 20% 30.4% -2.7% -1.8% -0.9% -3.6% -13.6% -19.5% -14.7% -100.0%

REST PHYS 38.9% 1.5% 1.0% 0.5% 1.9% 6.8% 9.6% 7.2% 26.9%

TOP 50% 30.8% -2.2% -1.3% -0.9% -3.6% -21.8% -13.3% -7.1% -100.0%

REST PHYS 42.3% 2.7% 1.5% 1.1% 4.2% 23.4% 14.1% 7.5% 55.6%

Bundle Definitions Definitions/Pricing Enable Provider Benchmarking


Physician Name

Physician NPI

Episode

Counts

Patient

over Expect

ed Payment, %

Average Episode Payment

Average

Length of Stay

Readmission Rate

ER Visit Rate

Complication Rate

(All)

Complication Rate

(Type I or III only)

Mortality Rate

Benchmark at 20%

Benchmark at

50%TotalAcute Care

Post Acut

e Paul Bernard Murray 1376518035 526 30.4% -2.7% -1.8%

-0.9% -3.6% -13.6%

-19.5% -14.7% -15.1% -100.0%TOP 20%

TOP 50%

Durgesh G Nagarkatti 1285692798 290 31.4% -1.3% -0.3%

-1.0% -3.5% -36.9% -2.4% 6.4% 7.3% -100.0%

TOP 50%

Jeffrey K. Burns 1497971667 200 41.5% 1.5% 1.2% 0.3% -3.6% -32.4%-

16.1% -49.2% -60.2% -100.0% Mark Shekhman 1720245178 173 46.8% 3.9% 3.4% 0.5% -4.5% -43.7%

-54.4% 1.1% 12.9% 154.7%

Christopher J Lena 1407853773 42 35.7% -4.4% -2.4%

-1.9%-11.3% -100.0%

-100.0

% -80.8% -76.5% -100.0%

Peter R Barnett 1033116009 41 46.3% -0.9% 0.4%-

1.3% -2.9% 61.1% 51.6% 7.1% -13.1% -100.0%

Michael A Miranda 1205833308 15 33.3% -7.0% -4.3%

-2.7% 4.2% -100.0%

-100.0

% -100.0% -100.0% -100.0%

Mahesh I Patel 1699960856 11 54.5%10.5

% 5.7% 4.8% 47.0% 69.4% 9.1% 18.3% 63.0% 655.6% James T Mazzara 1548224512 10 40.0%

11.1% -0.6%

11.7% -6.3% 312.7%

314.0% 99.9% 79.2% -100.0%

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Bundle Definitions Definitions / Pricing Enable Tiered Networks


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CLIENT: Large health system with a contract-management system. Needed to define bundles, improve clinical protocols, and offer bundled-payment service lines to respond to market

GOAL: Reduce time to market by leveraging consulting and technology expertise to define bundled-payment offering

CONSULTING: Advisory Services helped Hartford’s clinical and financial teams define, create, implement, and automate five behavioral and five women’s-health bundles

SOFTWARE: Episode Manager provided the technology to automate the new reimbursement models

HowVendor Helped

• Create episode definitions • Build models to validate episode definitions• Test payment models and attribution logic for new bundles, and automate claims flow for payment

• Support clinical teams with analytics for delivery transformation

Deliverables

Bundle Definitions Turning to Outside Expertise

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Five Keys to Organizational SuccessFee for Value Implementation Checklist


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1. What is Your Organizational Readiness?

TechnologyOrganizational implementation of value-based reimbursement requires enhancement of many systems and technologies.

EHR systems provide a key technological component in any value program. What additional EHR enhancements would need to be made?

Will your current billing/accounting processes and vendors be able to support the demands? Select a solution that has scalable big data infrastructure, rapid episode design tools, and has

truly automated the episode management process. Select a solution that has visibility into the episodes through dashboards, notifications, and

episode coordination. Ensure your partner has the contract management support you will need as you expand your

value based contracts.

Human Capital Do you have support of the provider community to engage in pricing and performance

discussions? Will your contracts be able to be amended with new payment terms? Does this program have the support of leadership and fit with the mission and goals of the

organization?

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Post-Acute Care OTHER

Post-Acute Care LTCH

Post-Acute Care IRF

Post-Acute Care HHA

Post-Acute Care SNF

Post-Acute Care PROF

Post-Acute Care OP

Post-Acute Care IP

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Post-Acute Care SNF

Post-Acute Care HHA

Post-Acute Care IRF

Post-Acute Care LTCH

Post-Acute Care OTHER

Service Distribution across All Episodes

1. What is Your Organizational Readiness?Payment by Service Type Highlights Patient Trajectories

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Hospital Name Readmission Count Total Payment Mean Payment Mean LOS

Medical Center A 203 $1,289,394 $6,352 6.1

Medical Center B 11 $59,675 $5,425 5.3

Medical Center C 10 $92,858 $9,286 6.4

Medical Center D 5 $24,628 $4,926 4

Medical Center E 4 $17,068 $4,267 3.5

Medical Center F 2 $14,165 $7,083 4

Medical Center G 2 $110,319 $55,160 24

Medical Center H 2 $7,764 $3,882 5

Medical Center I 2 $7,025 $3,513 4

Medical Center J 1 $1,128 $1,128 2

Medical Center K 1 $8,780 $8,780 7

Medical Center L 1 $4,342 $4,342 2

Medical Center M 1 $4,651 $4,651 5

Medical Center N 1 $4,551 $4,551 8

Medical Center O 1 $13,496 $13,496 29

Medical Center P 1 $3,670 $3,670 5

Medical Center Q 1 $5,003 $5,003 5

Medical Center R 1 $5,755 $5,755 2

Medical Center S 1 $7,989 $7,989 5

Do you have the right partners in the community?

Do you have the level of integration needed to manage the patient trajectory?

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Do you know where your patients are going? Are you aligned with care providers?

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Skilled Nursing Facility Name

Admission Count

Total SNF Payment

Mean Episode Payment

Mean SNF

Payment

Mean LOS

Readmission %

ER % PAC % Mortality %

ALL (Total) 90 $1,325,553 $30,785 $14,728 43.3 24% 38% 29% 3%

SNF 1 12 $261,707 $34,032 $21,809 55.6 33% 33% 33% 8%

SNF 2 7 $76,595 $31,943 $10,942 36.3 0% 14% 14% 0%

SNF 3 7 $141,471 $31,435 $20,210 47.7 14% 43% 14% 0%

SNF 4 6 $56,455 $25,695 $9,409 32.3 50% 50% 50% 17%

SNF 5 5 $77,700 $35,486 $15,540 39.4 20% 20% 20% 0%

SNF 6 5 $35,516 $23,888 $7,103 18.2 0% 0% 20% 0%

SNF 7 5 $37,142 $21,315 $7,428 20.6 60% 80% 80% 0%

SNF 8 4 $57,555 $28,894 $14,389 35.5 50% 75% 50% 0%

SNF 9 4 $69,493 $33,369 $17,373 55.8 50% 50% 75% 25%

SNF 10 3 $16,035 $30,214 $5,345 28.3 0% 0% 0% 0%

SNF 11 3 $39,652 $23,430 $13,217 37.7 0% 0% 0% 0%

SNF 12 3 $51,296 $23,567 $17,099 47.7 0% 0% 0% 0%

SNF 13 3 $56,267 $24,494 $18,756 54 0% 0% 0% 0%

SNF 14 2 $22,407 $26,148 $11,204 47.5 50% 100% 0% 0%

SNF 15 2 $39,242 $29,643 $19,621 47 50% 100% 50% 0%

SNF 16 2 $17,208 $13,688 $8,604 35.5 0% 100% 0% 0%

SNF 17 2 $11,472 $22,699 $5,736 20 0% 0% 0% 0%

SNF 18 2 $32,780 $34,075 $16,390 40.5 50% 50% 0% 0%

Track where your patients are going when discharged from

acute care.

Identify facilities with lower readmission rates,

preventable complications, and other quality metrics.

Compare Episode and SNF payments across multiple

facilities.

Minimize financial risk with transparency into post acute

care.


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Source: MedAssets’ Provider Analysis.

Risk-adjusted Physician Performance Comparison

Are your physicians ready?

Good performance physician with lower-than-average episode cost and readmission

rate

Bad performance physician with higher-than-average episode cost and readmission

rate


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Method Examples Features

Complete FFS No Episode, FFS No payment overlap, can be applied at individual patient/physician level

Individual Episode CHF, AMI, Hypertension High episode overlap. Difficult to separate out typical services or PAC among episodes that belong to the same system

Episode by Disease Category

Circulatory System Episode (CHF, AMI, Hypertension, Stroke, etc).

Respiratory System Episode (asthma, COPD, etc)

Medium episode overlap. Easier to separate out typical services between different disease systems. Could still be changed to assign PAC to only one episode

Episode with Multiple Diseases

Chronic Episode vs. Mental Health Episode, etc.

Low episode overlap. Relatively easy to separate out typical services and PAC for chronic episode vs. others, but typical services and PAC definitions become very unspecific, due to the heterogeneity of the diseases included under chronic episode

Complete Capitation No episode, PMPM No payment overlap, can only be applied at large patient / provider population

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Understand how the pieces fit together from one methodology to the next.

2. What is Your Fiscal Readiness?

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Value-Based reimbursement disrupts the established cash flow and collections processes on which organizations depend Change in care practices will require personnel, system resources, evaluation,

refinement, etc. Do you have an adequate fiscal cushion to support these efforts? Are you prepared to manage the change in department cash flow and collections?

Are you looking to offset a Medicare Bundled Payment program with Commercial Bundled Contracts?

Are you currently exploring other revenue-enhancement opportunities within your business? (Boutique services, concierge medicine, etc.)

Do you currently calculate the true cost of service and cost of preventable complications? This includes the costs related to delivery and episode (outpatient services, post acute, readmissions to other facilities).

Payments to out-of-network providers are true costs in a bundled-payment environment


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$4,428$4,132

$3,874$4,078

$5,628

$3,815

$1,436

$3,492

$6,934

$4,471

$1,690$1,220

$1,150

$3,665$4,066

$5,186

$3,580

$1,463

$1,890

20% 37% 7% 9% 15% 26% 2% 5% 65% 27% 7% 6% 5% 18% 26% 11% 6% 6% 7%

Spine

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Exposure per case

Bundle Definitions and Pricing Drive Your Exposure Risk


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Understand Your Risk Exposure

The episode definition you select determines much of the financial exposure for your organization

The CMMI BPCI definition for COPD includes many clinically-unrelated MS-DRGs and diagnoses codes

This poses significant financial risk for readmissions

Trigger MS-DRG

Readmission MS-DRG

MS-DRG DescriptionMean Episode

Payment

Readmission Claim

Payment

190 853INFECTIOUS & PARASITIC

DISEASES W O.R. PROCEDURE W MCC

$17,427 $33,002

191 885 PSYCHOSES $14,797 $4,328

191 853INFECTIOUS & PARASITIC

DISEASES W O.R. PROCEDURE W MCC

$14,797 $26,272

202 372

MAJOR GASTROINTESTINAL

DISORDERS & PERITONEAL INFECTIONS W CC

$12,322 $6,578


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Understand Your Risk Exposure

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MS-DRG Description Patient

CountTotal

PaymentClaim Count

Post-acute Care

1-30 days

31-60 days

61-90 days

192 CHRONIC OBSTRUCTIVE PULMONARY DISEASE W/O CC/MCC 2 $8,079 2 0 1 1

233 CORONARY BYPASS W CARDIAC CATH W MCC 1 $40,240 1 1 0 0

236 CORONARY BYPASS W/O CARDIAC CATH W/O MCC 1 $20,780 1 0 1 0

371MAJOR GASTROINTESTINAL DISORDERS & PERITONEAL INFECTIONS W MCC

1 $11,166 1 0 1 0

The above example is from an analysis of readmissions for CMMI’s BPCI Hip and Knee Episode, which includes MS-DRGs 469-470. Readmissions for these MS-DRGs are included in the BPCI Episode definition. Therefore, an organization will not be paid

separately for these readmission claims. The total payment above represents the dollars at risk under this episode definition.



To prepare for risk-based contracts, providers should

Identify operational, competitive, and financial risks associated with the relevant patient populations

Improve organizational abilities related to patient care management, which is the key to managing operational risk

Address the competitive risks that happen when traditional lines of between providers and payers are crossed

Adopt strategies and tactics to manage financial risk, beyond buying malpractice and stop-loss insurance


SOURCE: Nugent, Michael, “A Framework for Managing Risk-Based Managed Care Contracts,” hfm, Dec 2013 73


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Multiple episode definitions are available on the market today. Which definitions work best with your patient mix, quality programs, risk acceptance, etc.? Choose the right episode for your organization

How many clinical departments, payers, providers, and patients do you want to start with? The phased, or gradual approach is often preferred to minimize workflow impact and financial risk

How much risk are you willing to take on, and for what length of time? This will help determine which other caregivers you look to partner with

Can you start with a limited population where you may have more control via financial incentives, etc.? Are there any current initiatives or programs in place that would transition well into a value based system?

Which episodes should your organization start with? By starting with low risk episodes, there is lower gain, or savings opportunity. Episodes with more financial risk provide a greater opportunity for care improvement and delivery, as well as a high cost-saving opportunity – your best learning opportunity

3. What Project Scale is Best for You?

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Not all episode definitions for the same disease condition will produce the same results:

Patient identification (trigger mechanism, etc.) Length of episode: Pre episode period, episode start date, episode end date. Patient Exclusions Included and excluded services Principle Accountable Provider Core Services Quality Metrics Severity Calculation

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The result can be a very different budget price, varying the fiscal impact to your organization for the “same” episode.

Choose the right episode definition for your organization.


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Arkansas PaymentImprovement Initiative

CMMI Bundled Payment for Care Improvement

(model 2)

Prometheus American Board of Medical Specialties MedAssets Chronic Care Episodes

Episode TypeAcute CHF Acute CHF Chronic CHF (Retrospective) Chronic CHF (Prospective) Post Acute CHF Chronic CHF

MedAssets Chronic Care Episode 1 (MCCE1)

Episode

Definition

Trigger Event Hospital discharge with subset of ICD-9 codes related to MS-DRG 291-293

Hospital discharge with MS-DRG 291-293

E&M visit for CHF (defined by ICD-9 diagnosis)

Two ambulatory visits for CHF-related care, one in measurement year and one in the prior year (defined by ICD-9 diagnosis)

Hospital discharge for CHF (defined by ICD-9 diagnosis)

Two ambulatory visits for CHF-related care with at least one visit > 1 month prior to the measurement year

Presence of at least one inpatient or outpatient diagnosis code, related to one of the following index conditions: Heart Failure, Stroke, Peripheral Vascular Disease, Ischemic Heart Disease, Hypertension, Hyperlipidemia, and Diabetes. (defined by ICD-9 diagnosis)

Prior Period Trigger must be preceded by30 day all cause clean period

Not required Not required 12 months prior to measurement to identify 1st trigger

12 months 12 months 12 months

Episode Start Trigger admission date Trigger admission date Trigger service date Start of measurement year Trigger hospital discharge date

Start of measurement year Start of measurement year

Episode End 30 days from trigger date of discharge >= 30 days from trigger date of discharge

12 months from trigger service date

End of measurement year 4 months from trigger discharge date

End of measurement year End of measurement year

Patient Exclusion

– Age: <18– Pregnancy– Comorbidity: ESRD, dialysis, LVAD, IABP, select organ transplants, cancer– Incomplete episode: Inpatient death, LAMA

– Comorbidity: ESRD– Gaps in FFS enrollment during episode period

– Age: <18 or >=65– Enrollment gap (>30 days) during episode period– Pregnancy– Comorbidity: ESRD, dialysis, organ transplants, cancer, HIV, etc.– Incomplete episode: Inpatient death, LAMA

– Age: <18 or >=65– Pregnancy– Comorbidity: ESRD, dialysis, organ transplants, cancer, HIV, etc.– Incomplete episode: Inpatient death, LAMA

– Age: <18– Enrollment gap during episode and prior period– Pregnancy– Comorbidity: ESRD, dialysis, LVAD, IABP, organ transplants, cancer, HIV– Hospitalization within 6 months prior to episode start for a primary diagnosis of CHF or a 2nd diagnosis of CHF with a primary cardiopulmonary diagnosis

– Age: <18– Enrollment gap during measurement year and prior period– Pregnancy– Comorbidity: ESRD, dialysis, LVAD, IABP, organ transplants, cancer, HIV– Hospitalization within 6 months prior to episode start for a primary diagnosis of CHF or a 2nd diagnosis of CHF with a primary cardiopulmonary diagnosis

- Age: <18 or >=65- Cumulative enrollment in the baseline year < 90 days- HIV, ESRD, Cancer, Pregnancy, Major Organ Transplant

Service Inclusion

– All cause readmissions– All facility and inpatient professional services, Emergency Department visits, observation and post-acute care– CHF-related outpatient labs & diagnostics, outpatient costs and medications

– CHF-related readmissions (defined by MS-DRG)– CHF-related other Part A & B services (defined by ICD-9 diagnosis)

– CHF-related inpatient and outpatient claims (defined by ICD-9, CPT or HCPCS ). – CHF-related prescription drugs

– CHF-related inpatient and outpatient claims (defined by ICD-9, CPT or HCPCS ). – CHF-related prescription drugs

– All inpatient and outpatient claims / encounters with a CHF-related or cardiopulmonary-related diagnostic code appearing in any position.– All claims / encounters with CHF-related services (CPT or HCPCs). – All related prescription drugs

– All inpatient and outpatient claims / encounters with a CHF-related or cardiopulmonary-related diagnostic code appearing in any position.– All claims / encounters with CHF-related services (CPT or HCPCs). – All related prescription drugs

The episode payment will cover inpatient, outpatient, professional services and outpatient pharmacies that are directly or closely relevant to the index conditions. This includes claims where the principal diagnosis is defined as related to the index condition. The episode payment will cover all outpatient prescriptions that belong to the therapeutic categories as listed in the episode definition.

Service Exclusion

– CHF-unrelated outpatient labs & diagnostics, outpatient costs and medications

– CHF-unrelated readmissions (defined by MS-DRG)– CHF-unrelated other Part A & B services (defined by ICD-9 diagnosis)– Hospice– Outpatient pharmacy

– CHF-unrelated inpatient and outpatient claims (defined by ICD-9, CPT or HCPCS ). – CHF-unrelated prescription drugs

– CHF-unrelated inpatient and outpatient claims (defined by ICD-9, CPT or HCPCS ). – CHF-unrelated prescription drugs

– CHF-unrelated claims / encounters or prescription drugs

– CHF-unrelated claims / encounters or prescription drugs

-Major procedures are not covered by the episode payment and will be paid separately as fee-for-service. - inpatient or outpatient facility and professional claims that are not related to the index condition as defined in the episode.- outpatient prescriptions that do not belong to the therapeutic categories as listed in the episode definition.


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Aggressive = Greater Opportunity for Savings

and Care Improvement in the Acute Care Phase

Example shown here is for a Hip / Knee Replacement

Episode

Conservative = Less Opportunity for Care

Improvement, Smaller Margin of Cost Savings in

the Acute Care Phase

Example shown here is for a COPD Episode

What is the best approach for your organization? Make sure it fits your needs.

Episode Phase

Total Episode Payment

Total Saving Opportunities


Savings per Patient

PC Savings Typical Savings Total

PCTypica

lTotal

Saving $ % Saving $ % Saving $ %

Acute Care$2,882,25

1 $18,837 0.7% $19,590 0.7% $38,427 1.3% $5,221 $34 $35 $70

Post-acute Care

$4,987,233

$2,252,702 45.2% $339,071 6.8% $2,591,77

3 52.0% $9,035 $4,081 $614 $4,695

Total$7,869,48

4 $2,271,539 28.9% $358,662 4.6%

$2,630,201

33.4% $14,256 $4,115 $650 $4,765

Episode Phase

Total Episode Payment

Total Saving Opportunities


Savings per Patient

PC Savings Typical Savings Total

PCTypica

l TotalSaving $ % Saving $ % Saving $ %

Acute Care$15,594,27

2 $127,198 0.8% $669,394 4.3% $796,592 5.1% $12,014 $98 $516 $614

Post-acute Care

1-30 days

$21,425,809

$1,701,845 7.9% $608,103 2.8% $2,309,948 10.8% $16,507 $1,311 $468 $1,780

31-60 days $7,190,407

$1,138,299 15.8% $193,064 2.7% $1,331,364 18.5% $5,540 $877 $149 $1,026

61-90 days $2,937,579 $612,537 20.9% $252,258 8.6% $864,794 29.4% $2,263 $472 $194 $666

Total$47,148,06

7 $3,579,87

9 7.6% $1,722,81

9 3.7% $5,302,699 11.3% $36,324 $2,758 $1,327 $4,085

Sources: MedAssets CMMI BPCI Analysis, data has been de-identified.


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Ensure you have the right team in place, ready to provide the structure needed for success

Inclusive project team: multiple levels, departments, and a dedicated project manager

Developing, testing, refining the data-exchange components is the largest activity

Ongoing data quality is key – repeatable QC processes must be in place

Did I mention? Data quality is KEY!

Start on legal issues early: PHI exchange, contracts, etc. [See the box to the right]

Plan early for communication of metrics. Learning sessions are extremely valuable

Establish communication plan and incorporate bundled payments into strategic organizational efforts

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Think early the about legal issues around the transition to bundled payment

Gainsharing and CMP law

Coordination and Stark and Anti-Kickback law

Medical-loss-ratio issues for plans

Indemnification

Dispute resolution and appeals

Risk certification

HIPAA

Standards and the practice of medicine

Participation and credentialing criteria

Care attribution and payment allocation

Payment for non-par providers

Continuation of coverage issues

Coordination of benefits

4. What is Your Implementation Strategy?

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• Reduce complications in acute care settings. This reduces LOS and helps optimize patient-volume management

• Identify episodes for bundled payment reimbursement

• Identify high-performance physicians

• Identify care-redesign initiatives

• Select high savings opportunity bundles (acute care only) e.g. Colon resection, Hysterectomy, COPD

• Identify facilities for engagement

• Identify “top 50% benchmark” physicians

• Activate care-redesign initiatives

• Expand to additional bundles (acute care only)

• Activate physician-improvement initiatives to top 20%

• Expand clinical-improvement initiatives

• Identify high-performance post-acute care facilities and partners

• Identify care-redesign initiatives for post-acute care

• Expand market share payor contracts via demonstrated acute bundles: low-cost. High-quality care

• Evolve high-performance acute bundles to include post-acute care

• Activate post-acute care improvement initiatives

FFSBundled

Payment: Phase 1

Bundled Payment:Phase 2

Bundled Payment: Phase 3

Glide Path from FFS to Bundled Payment to Maximize Savings: Sample Plan

4. What is Your Implementation Strategy?Use a Data-Driven Strategy to Address the “CFO Dilemma”

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Respiratory Failure, respiratory insufficiency

Urinary Tract Infections

Pleurisy; pneumothorax; pulmonary collapse

Aspiration pneumonitis; food/vomitus

Postoperative functional GI disorders, manipulation of intestine

Delirium

Bacterial infection; unspecified site

E Codes: Adverse effects of medical care

Coma; stupor; and brain damage

Internal abscess, peritonitis, perforation, drainage

Mycoses

Fall and trauma

Pressure Ulcers, Stage 3 & 4

0 20 40 60 80 100 120 140 160

Preventable Complication Counts During Index Stay

AMICOPDASTHMACABG1CABG2CABG3CABG4CVR1CVR2COLON1COLON2GALL2GALL3GALL4HYST1HYST2HYST3DMHFPCI1

80-20 Rule applies to reducing complicationsFocus to where it matters!

4. What is Your Implementation Strategy?

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Your selected technology should promote pricing and performance transparency for various participants, including your physician partners. Data transparency is vital to allow you to gain support from both your internal organizational members and external partners

Select a solution, or prepare a plan, that will allow you to deliver results with consultative information. Help providers understand the reports and metrics for changes to improve care management

Evaluate performance of the episodes against the budgets to determine if modifications are required based upon changes in fee schedules, etc. Choose a partner or solution that will be flexible and expandable as you progress down the path of value based payment.

5. How Will You Monitor and Evaluate?

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The Way ForwardWhere Do We Go From Here?

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The Way ForwardThe River Moved!

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The Way ForwardMy Water’s Gone!

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Total Hip MS-DRG

470Variable

Cost $8,917

Ancillaries

Variable Cost$711

• Lab & Blood• PT/OT• Diagnostics• EKG, etc.

Implants

Variable Cost $4,844

Length of Stay

Variable Cost $1,381

Med/Surg Supplies

Variable Cost $590OR/Anesthesia and

Cath Lab

Variable Cost $1,129Rx and IV

Variable Cost $262

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The Way ForwardKey is Predictability of Cost and Quality


How is Valuedefined?

How is Qualitydetermined?

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The Way ForwardHFMA’s Value Project

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Blueprint for action for value-oriented providers

Business models for value

State of the industry and future trends

WHERE TO LOOK www.hfma.org/valueproject View and download reports, tools, & case studies Use web-based tools Conferences, including ANI: HFMA National Institute 2014

The Way ForwardHFMA’s Value Project

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Value

Performance Improvement

Contract and Risk

Management

People and

Culture

Business Intelligence

Collaboration, accountability, and

communication

Data and metrics

Elimination of variation, unsafe practices, and waste

Measurement, assessment, and mitigation of risk

HFMA Organizational Road Maps

The Way ForwardHFMA’s Value Project – Four Key Capabilities

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“Leadership has nothing to do with titles;

it has everything to do with, “Do you inspire other people? Do they want to follow you?

Do they want to be with you?”

Other Administrative Departments

Physicians

Nurses and Other Clinicians

Other Entities Within Your

Health SystemPayers

Patients and Community

Members

Finance

-Tom Atchison, author of

Followership: A Practical Guide to

Aligning Leaders and Followers

The Way ForwardHFMA’s Value Project – Lead Through Collaboration

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The Way ForwardHFMA’s Value Project – Lead Through Collaboration

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Where’s your focus?


David Hammer, PrincipalHealthcare Performance Management Consultants, LLCMr. Hammer is a Principal at Healthcare Performance Management Consultants, LLC (HPMC), in Berkeley Lake, GA. In his leadership role at HPMC, he works with hospitals and health systems to optimize revenue cycle and managed care outcomes. Prior to joining HPMC, David was Senior Vice President of Revenue Cycle Advisory Solutions at MedAssets and is a former Partner at Accenture. David focuses on revenue cycle and healthcare reform issues for hospitals, health systems, and related entities. He serves many of the largest health systems, MD-led clinics, and academic medical centers in the US. He was formerly VP of enterprise revenue management at McKesson and previously Chief Revenue Officer for Charter Behavioral Health, a +100-facility health system. David has over 30 years of healthcare experience, including executive leadership and direction, revenue cycle transformation, information system planning / implementation, and consulting. He has worked for a variety of leading health systems, software vendors, and professional services firms.

Background and AffiliationsMr. Hammer received an MBA in Management and an MHS in Health Care Administration from the University of Florida. He also received a BBA in Accounting with a minor in Information Systems from the University of North Florida. Mr. Hammer is certified by HFMA as a Fellow (FHFMA) and as a Certified Healthcare Finance Professional (CHFP). He has been repeatedly named an HFMA Distinguished Speaker, and is a 2007 recipient of HFMA’s Medal of Honor service award.

Recent PublicationsMr. Hammer’s is the author of “No Money, No Mission – Healthcare Revenue Cycle Best Practices,” which will be published in 2014 by Healthcare Performance Press. Mr. Hammer’s most recent publication is “Health Reform: Intended and Unintended Consequences,” which appeared in the October 2010 issue of HFMA’s healthcare financial management journal (hfm). “Don’t Panic: CFOs React to the New Economic Reality,” appeared in hfm’s March 2009 issue. Mr. Hammer authored the February 2008 cover story in hfm, entitled “Beyond Bolt-Ons – Breakthroughs in Revenue Cycle Information Systems.” He also wrote the July 2007 cover story, called “The Next Generation of Revenue Cycle Management,” as well as the July 2005 hfm cover story, entitled “Performance is Reality: Is Your Revenue Cycle Holding Up?” Another one of his articles, “UPMC’s Metric-Driven Revenue Cycle,” appeared in the September 2007 issue of hfm,

Contact InformationMr. Hammer can be reached by telephone at (954) 648-4764 and/or by e-mail at [email protected] or [email protected]

Instructor’s Bio

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mailto:[email protected]

mailto:[email protected]


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Documents

Modeling Reimbursement in the Changing Payment Environment David Hammer – Principal Healthcare Performance Management Consultants, LLC HFMA – Kentucky